PTAB delivers final CBM review ruling

The US Patent Trial and Appeal Board (PTAB) has delivered a final ruling in a covered business method (CBM) review case for the first time, cancelling five claims in a patent owned by software company Versata.

CBM reviews, which came into force in September 2012 as part of the America Invents Act (AIA), allow for a patent’s validity to be challenged – but only if it is directed to a “financial product or service” and the petitioner has been sued by the patentee.

Versata sued rival company SAP America in 2007 for infringing a patent covering “a method and apparatus for pricing products and services”. A district court later found in favour of Versata and the US Court of Appeals for the Federal Circuit affirmed the ruling on appeal.

On the day the AIA came into force – September 16, 2012 – SAP filed for a CBM review (the first ever) of Versata’s patent at the PTAB, which is part of the US Patent and Trademark Office (USPTO). Oral arguments were heard in April this year.

SAP said some of the patent’s claims are too abstract and therefore not patentable. In response, Versata argued that the claims, as a whole, are directed to a specific and practical way of determining a product price.

In a unanimous decision on June 11, three PTAB judges cancelled five claims incorporated in the patent, saying that “specifically, the claims recite unpatentable abstract ideas and the claims do not provide enough significant meaningful limitations to transform these abstract ideas into patent-eligible applications of these abstractions”.

“Our client is very pleased with the result,” said Steve Baughman, partner at Ropes & Gray LLP, who represented SAP in the litigation.

But the PTAB "got it wrong" said attorney Martin Zoltick, whose law firm Rothwell, Figg, Ernst & Manbeck PC acted for Versata, adding that the company will seek a review of the board’s decision.

In the case, the PTAB assessed Versata’s patent’s validity by using the “broadest reasonable interpretation (BRI) standard”, used by the USPTO for more than 100 years and under which claims are analysed more broadly than in conventional litigation. The BRI allows patentees to amend their claims, but can disadvantage them.

In litigation, claims cannot be amended and courts take a narrower view of them, looking at much more evidence such as prosecution history. Versata wanted the PTAB to use this method, but the PTAB rejected this request, saying it has used the BRI for many years to positive effect.

There is a lot of debate among patent lawyers about whether the PTAB should have followed the BRI approach, said Steve Auvil, partner at Squire Sanders LLP.

“The PTAB believes that Congress gave it the authority to adopt regulations allowing it to apply the BRI. It remains to be seen whether the courts see that as a proper exercise of the PTO’s authority.”

“There is no question in my mind that this issue will be challenged in a case – maybe in an appeal from this case,” he added.

Auvil said the BRI is controversial because there is a greater likelihood that patent claims will be held unpatentable under it.

“They are more susceptible to attack, and that’s why the result in this case is going to drive a lot of filings for CBM reviews, post-grant reviews and inter partes reviews (other AIA provisions),” he said.

In a blog post entitled ‘Did the PTAB just kill software patents?’, patent attorney Gene Quinn argued that the PTAB’s view of Versata’s claims was too broad and the ruling “virtually guarantees that 101 [the statute covering patentability] will be used by patent examiners to effectively prevent software patents from issuing altogether”.

But Auvil said the effects may not be so controversial.

“This was a very, very carefully vetted decision, as it’s the first final CBM review decision... It is not a rogue agency decision.”

One of the biggest “takeways” from the case, said Baughman, is that it will encourage people to check what qualifies for a CBM review, as this decision reinforces that the scope of patents that can be challenged using CBM reviews is broad.

Before, he said, there was an assumption that only patents relating to finance only fall under CBM reviews, but that this may no longer be the case.

After PTAB rulings, parties can ask the board to re-hear the case or appeal to the US Court of Appeals for the Federal Circuit.